Yes, data from the Yale Center for Environmental Law & Policy and the Fraser Institute’s Economic Freedom of the World Index send a resounding message:
Economic freedom brings about environmental protection.
Why? Because economic freedom leads to prosperity and only prosperous countries can truly protect their environment.
Are you skeptical? As the graph above shows, the countries with high economic freedom correlate well with the countries that have more and better environmental quality. Here’s how the graph was developed:
The Fraser Institute divides 165 countries of the world (those for which good economic information is available) into four quartiles: the most free (1), the least free (4) and the two quartiles in between. These quartiles are based on the economic freedom in each country, which reflects the “size of government, protection of property rights and enforcement of contracts, access to sound money, international exchange, and regulation of credit, labor, and business.”
The Yale Index rates countries from zero to 100 based on “climate change performance, environmental health, and ecosystem vitality.” Higher figures indicate greater environmental quality.
Staff members of the Common Sense Economics text and website correlated the two indices, using the 123 countries for which Fraser has economic data extending from 2000 to 2019. In the case of economic freedom, the year of comparison was 2019; in the case of the Yale index, the year was 2018.
In sum, the most economically free countries (the top quartile) had an average environmental score of 73.1. The least economically free countries had an average environmental score of 45. The middle quartiles had an environmental score in between the two.
These figures show that there is a strong positive relationship between economic freedom and the quality of the environment. To a large degree, the demand for a cleaner environment increases with income. This graph and discussion of it will appear in the fourth edition of Common Sense Economics by Gwartney et al., forthcoming.
Sources for graph above: Gwartney et al., Economic Freedom of the World: 2021 Annual Report (2021), https://www.fraserinstitute.org/studies/economic-freedom-of-the-world-2021-annual-report; and Wendling, Z., D. Esty, J. Emerson, M. Levy, A. de Sherbinin, et al. The 2018 Environmental Performance Index Report. New Haven, CT: Yale Center for Environmental Law and Policy (2018), https://epi.envirocenter.yale.edu/node/36476.
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